Bin Ren/Elwood Asset Management.
The entrepreneur betting Blockchain-powered titans of industry will outperform
Bin Ren's index is following the adoption of crypto among biggest companies.
“Internally we have a secret code for creating products,” Bin Ren laughs, his PR adviser looking increasingly nervous.
“She hasn’t heard about it, it’s not approved by the PR firm yet,” he grins.
At 37, Ren already has a colourful backstory.
Trained as a computer scientist, the entrepreneur was among the Cambridge alumni who developed the Xen virtual machine monitor, later used by Amazon to build AWS.
Ren went on to create the cryptocurrency Reddcoin, designed to put a value on social media interactions in 2014, which, by the January 2018 crypto peak, had a market valuation of over $700m (now a more humble $40m).
Today Ren is onto his next project, Elwood Asset Management, a crypto asset manager owned by hedge-fund billionaire Alan Howard, that Ren runs with a mission to track the growth of the blockchain-powered economy.
“When I first heard about crypto I was actually super sceptical,” Ren says, clearly having learnt from his stint as a crypto pioneer.
Like Ren’s other projects Elwood is again doing things differently, this time by offering institutions exposure to crypto via the “most advanced, yet acceptable” means.
“It’s what we call MAYA, our secret code. It’s all about being as innovative as possible, but delivering a format that is acceptable to investors.”
Tracking the blockchain-powered economy
His first product launched in March, the Elwood Blockchain Global Equity Index, an index tracking blockchain-enabled public companies around the world and calculated by Solactive AG.
“We realised that there are a lot of public companies around the world who are already doing a lot of blockchain-related initiatives, either to cut costs, increase operating efficiencies or launch new products,” explains Ren.
“But, especially for large companies, none of this potential has been priced into the market, because analysts are each trying to track so many details—nobody has the extra row in the spreadsheet for blockchain-related initiatives for them to understand the impact.”
Elwood managed to “price-in” blockchain by hiring a team of analysts to do that work and look for public companies “whose earnings can be positively impacted by blockchain technology”.
The result is a 45-company index, weighted based on blockchain potential, and distributed across sectors like financial services, technology, energy, consumer goods and others.
Then working with Invesco, among the largest asset managers with over $800bn under management, an ETF based on Elwood's index was launched.
Its current composition includes the likes of TSMC, the Taiwanese chipmaker which now sells heavily into the bitcoin mining community, and IBM, which is helping its clients with blockchain adoption.
Ren’s overall thesis is twofold, firstly that blockchain-enabled companies will ultimately outperform their peers, and secondly that there’s a frustration among investors restricted to equity markets that they’re missing out on crypto.
So far the ETF is a moderate success, holding around $21.7m in assets under management and currently outperforming the MSCi World index.
In May Ren launched Elwood’s second project, a crypto hedge fund report in partnership with PwC which for the first time revealed the size of assets under management in the crypto hedge fund industry.
The report showed the true scale of the secretive industry (far smaller than many believed), the average size of crypto hedge funds, and its impact on Elwood was instant.
“We are suddenly getting a lot of interest from institutional investors who are looking to allocate to crypto, and crypto hedge fund managers who are asking us about best practice,” says Ren.
His next project is now to build a product based on the research and demand “to connect institutional investors to crypto hedge funds”, yet he won’t reveal the details.
“We want to create breakthrough products, we’re not interested in copying anyone else.”